) reported a 14.3% fall in earnings per share to 66 cents in the
third quarter of 2012 from 77 cents in the same quarter of prior
year. However, earnings were in line with the Zacks Consensus
Estimate during the quarter. Total profit declined 17.0% to
$233.6 million from $281.6 million in the third quarter of 2011.
Revenues in the quarter dipped 10.3% to $3.8 billion; however, it
was higher than the Zacks Consensus Estimate of $3.7 billion. The
decline in earnings and revenues was attributable to lower
industry truck orders in North America and Europe due to the
unfavorable conditions in the global economy.
Revenues in the
Truck and Other
segment slipped 11.2% to $3.6 billion in the quarter. Pre-tax
profit in the segment ebbed 20.1% to $257.2 million versus $321.9
million in the third quarter of 2011.
PACCAR believes its DAF branded trucks in Europe will excel
further driven by new product launches such as DAF XF. For 2012,
industry registrations in the above 16-tonne truck market in
Europe is estimated to be 215,000-225,000 units. Further, truck
registrations in 2013 is expected to be in the range of
210,000-250,000 units due to the purchase of Euro 5 vehicles
ahead of the introduction of the Euro 6 emission requirement in
In the first nine months of 2012, PACCAR occupied a share of 29%
in the Class 8 retail market in the U.S. and Canada as customers
benefited from Kenworth and Peterbilt vehicles' low operating
cost. The company expects Class 8 industry retail sales in the
U.S. and Canada in the range of 210,000-220,000 vehicles for 2012
and 210,000-240,000 units for 2013, driven by ongoing replacement
of the aging fleet.
PACCAR is also optimistic about its expansions in South America
and Russia. The company's ongoing construction of a new DAF
factory in Ponta Grossa, Brasil and establishment of a
subsidiary, DAF Trucks, in Russia are expected to boost earnings.
PACCAR Financial Services (PFS)
segment rose 3.6% to $273.5 million while pretax profit increased
30.1% to $80.4 million from $61.8 million in the third quarter of
2011. PFS has a portfolio of over 149,000 trucks and trailers
while PacLease - a major full-service truck leasing company in
North America and Europe - has a fleet of over 32,000 vehicles.
During the quarter, PACCAR repurchased 570,000 of its common
shares for $22.6 million. With this, the company has repurchased
4.99 million shares for $192.0 million under the Board-approved
authorization of $300 million of stock repurchases.
PACCAR's cash and marketable debt securities amounted to $2.6
billion as of September 30, 2012, compared with $2.9 billion as
of December 31, 2011. Long-term debt was flat at $150 million
compared with the corresponding period of 2011.
Cash from operations decreased to $916.6 million for the first
nine months of 2012 from $1.2 billion in the same period of 2011
despite an increase in profit. The decline in cash flow was
attributable to increase in sales-type finance leases and dealer
direct loans on new trucks as well as unfavorable changes in
other operating activities. Meanwhile, capital expenditure for
the same period increased to $334.6 million from $214.7 million
in the first nine months of 2011.
PACCAR is the third largest manufacturer of heavy-duty trucks
(with a capacity of more than 15 metric tons) in the world after
), and has substantial manufacturing exposure to light/medium
trucks (with a capacity of 6-15 metric tons). The company also
provides customer support for its products with the supply of
aftermarket parts, finance and leasing services.
Due to the sluggish growth in the U.S. and economic weakness in
Europe, the company currently retains a Zacks #5 Rank on its
stock, which implies a short-term (1-3 months) Strong Sell
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